Report shows squeeze on Welsh families' spending

A revealing picture of how Wales is coping with a relentless economic slump is painted in new figures which have just been released.

A revealing picture of how Wales is coping with a relentless economic slump is painted in new figures which have just been released.

The data shows that we are spending more on heating and petrol costs, while simultaneously cutting back on healthy foods and becoming more reliant on state handouts.

While average weekly spending in Wales rose by £4.20 to £398.20 in 2009-11, it was still down on the pre-downturn levels of £406.70, which were recorded in 2006-08, according to figures from the Office for National Statistics.

A breakdown of spending suggests people in Wales are having to find an extra £1.30 a week for housing and fuel costs and £2 a week for transport, with spending on recreation and culture feeling the squeeze.

How does the average household in Wales spend its money? See all the data.

The amount, which puts spending in Wales at the second lowest after the north east of England, are not adjusted for inflation, suggesting households are buying even less since the squeeze took hold.

Incomes in Wales have also taken a hit, down by an average of £6.10 a week between 2010 and 2011, to £598. With earnings, investments, and pensions all bringing in less, people are more reliant on benefits to keep incomes up, receiving an extra £4.88 a week in state help.

Victoria Winckler, director of the Bevan Foundation think- tank based in Merthyr Tydfil, said: "The figures confirm that people in Wales are feeling the pinch.

"Average incomes are down but spending is up, so that means many people are under real pressure.

"And spending isn’t going up on luxuries, but on essentials like housing and heating.

"There’s no sign of long-term improvement here either.

"Five years on from the start of the recession, it’s clear that ordinary people are still paying the price, and with changes to benefits and the economy continuing to struggle, the outlook is very worrying."

The biggest areas of expenditure for Welsh households are housing and fuel at an average of £54.10 a week, and transport, which costs an average £53.80.

The figures suggest households are spending an extra 20p a week on electricity and 70p more on gas, the second highest rise in the UK, with another 70p to be found for petrol.

Luke Bosdet from the AA said while petrol price surges in 2011 had peaked at 137.3p per litre, they had risen as high as 142.5p in 2012.

He said: "There are people who simply can’t cut back any further on fuel bills, because they’re doing the essentials, like going to work, getting the kids to school and shopping.

"If people are spending more money on fuel, it means there’s less being spent on the high street, so that’s having an impact."

While people in Wales are spending an extra 80p a week on food, it appears they may be freezing spending or cutting back on healthy things, with spending on fresh fruit down by 20p a week, and spending on meat and fresh vegetables frozen.

However, spending on less healthy items appears to be up with an extra 50p a week going on prepared meat, 20p more on chocolate and 20p extra for fizzy drinks.

Politicians said that the figures highlighted the pressures on Welsh families during the continuing economic downturn.

Labour AM for Clwyd South, Ken Skates, said: "It paints a worrying picture of families having to make difficult choices as a result of big increases in the cost of food, fuel and transport.

"The fact that we are seeing less money spent on items such as healthy food is very worrying and risks storing up problems for the future.

"People in Wales are struggling with the depth and extent of the downturn and the figures send a timely message to the Chancellor as he prepares his Autumn statement that families urgently need more help."

Liberal Democrat AM Eluned Parrott said that in order to get the economy moving, people needed the money to spend.

She said: "Liberal Democrats are focusing on making sure people keep as much of the money they earn as possible.

"That’s why Lib Dem Ministers have cut income tax for people on low and middle incomes.

"By 2015, more than a million people in Wales will have had a £700 income tax cut and thousands more will be taken out of paying tax altogether.

"Sadly, the average income in Wales will remain low until we finally get a grip on the unemployment rate."

Plaid Cymru economy spokesman, Alun Ffred Jones agreed that consumer spending was a major source of economic growth, adding that the figures showed it was not increasing quickly enough to fuel any kind of meaningful recovery.

He said: "Prices for food, energy and transport are rising, but wages in Wales remain quite flat, and there are simply not enough well-paid jobs in the Welsh economy. Plaid Cymru believes therefore that major action needs to be taken at both the UK and Welsh levels.

"At the UK level, a fiscal stimulus should be introduced, particularly targeted at infrastructure improvements across the state, including spending in Wales, for example on electrification of the North Wales rail line, and more investment for the green sector.

"At the Welsh level, a comprehensive economic strategy must be drawn up using new fiscal powers for Wales. This would include funding extra National Insurance contribution holidays for employers and further rate relief for small businesses.

"Government expenditure is an economic tool that can be used to stimulate job creation in the private sector, in turn leading to increases in wages and a rise in family spending."

Next page: How our spending habits have changed and the impact of housing costs

Lifestyle choices

The ONS figures appear to highlight the way in which households in Wales are making choices about how to spend their hard-earned cash.

People in Wales have increased the average amount they spend on second-hand cars by £104 a year, to an average of £530.20, and decreased the average amount spent on new cars by £5.20 a year to £260.

Luke Bosdet from the AA said: "What’s happening is that people who might have thought about buying a new car are taking their budget down by a thousand or two, which is putting them into the second-hand market.

"Basically over the past three years, the sales of new cars to businesses have remained static.

"First registrations to private owners continued to fall, down 14% in 2011 compared to 2010. It just goes to show that there isn’t the money in people’s pockets to travel in the way they used to."

Households in Wales are still keen for someone else to do the cooking, with spending on takeaways up by an average of 40p a week to £4.10 and restaurant bills taking up an extra 30p a week, a spend of £12 on average.

However, we may be choosing drinking at home over going out, with at home spending up 30p to £6.50 a week overtaking drinks bought out, which was down 30p to £6.40.

While spending on holidays abroad still takes a bigger chunk of people’s spending, a shift towards holidays at home may be happening. People in Wales spent an average of £639.60 a year per household – spending was up by £20.80, but families paid out an extra £67.60 for UK trips, up by nearly half to £197.60.

When we are away we have cut our holiday spending nearly in half from £208 a year to £124.80.

People have cut back on sport and camping equipment, gardening and newspapers, books and stationery but upped their spending on TV subscriptions and cinema trips.

Personal grooming seems to have particularly suffered in Wales, the only part of the UK where people have cut back on haircuts and beauty treatments, toiletries, hair products and cosmetics – most parts of the UK have kept spending on at least some of those items.

Housing

Households in Wales seem to have escaped the soaring rents hitting much of the rest of the country, but people are still struggling to keep up with bills.

Spending on rents by tenants fell from an average £112.60 a week in 2010 to £100.00 in 2011, the biggest fall in the country.

However, the amount of housing benefit and allowances people were receiving increased by an average of £9.10 a week, suggesting households need more help to pay for the roof over their head.

Although rents were down, the cost of mortgages for homeowners rose by £9.50 a week to an average of £114.90.

While some of this may be positive news, with households spending an extra £6.40 a week on paying off the capital part of the mortgage, interest costs rose by £3.10 suggesting people in Wales may be missing out on the best deals.

Paul Lawler, from Flintshire-based online comparison site MoneySupermarket.com said: "If you’re fortunate enough to have a mortgage that went down when the base rate went down, some people, instead of keeping the saving, they kept putting it into the mortgage.

"Those people with lower deposits, it’s harder to do that, you do find the rate on the lower deposits is higher. It’s definitely two-tier market at the moment."

He said people on standard variable rates are likely to have seen rates go up this year, while at the same time interest rates for some products had dropped dramatically.

He said: "People who are generally benefiting from the reduction are people with large deposits, 40%."

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